Tax implications of financial orders

The tax implications of financial orders will be dependent on the type of orders made, the nature of the assets and the circumstances of the case. Specialist tax advice should be sought as required, in particular as to the net effect of the order before it is made. Particular considerations apply in relation to pensions. See Practice Notes: Tax implications of financial orders and Tax implications in relation to pensions.

Property adjustment orders

There are a number of tax consequences arising in connection with property adjustment orders, including:

  1. whether there is an exemption from capital gains tax (CGT)—note that where a disposal occurs on or after 6 April 2023, there are changes to the CGT rules that apply to transfers of assets between spouses and civil partners who are in the process of separating, and

  2. whether stamp duty land tax (SDLT) is payable

See: Property adjustment orders.

Periodical

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High Court judgment demonstrates usefulness of section 423 of the Insolvency Act 1986 in Schedule 1 claims (Re P (A Child) (Financial Provision))

Family analysis: In this Schedule 1 case the mother received, for her son’s benefit: a housing fund of nearly £1m (the property to be held on trust); child maintenance (including ‘HECSA’/carer’s allowance) until completion of his first degree; and lump sums in respect of his capital needs and her own substantial liabilities (chiefly relating to her unpaid legal fees). The father (whose resources could be measured in the ‘tens of millions of pounds’) had sought to prejudice the mother’s claims via transferring his valuable shares to family members, who then transferred the same into a trust structure (settled under Czech law). A further onwards transfer was then made of the trust’s assets into a Liechtenstein foundation. Inferences were drawn by the court in respect of the level of the father’s wealth, and specifically as to the value of the transferred shares. Detailed findings were made against him in respect of the identified transactions, which had been the focus of the mother’s section 423 application. Although a section 423(2) order was not actually made, the application was adjourned pending the father’s compliance with the award, with security in the sum of £600,000 also ordered, alongside a continuation of the freezing orders made earlier in the proceedings. David Wilkinson, solicitor at Slater Heelis, considers the issues.

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